In this article, we will speak about Forex trade and bot trading.
Introduction to Forex Trade and Bot Trading by Routerhostin
Foreign exchange (Forex trade) is a network of buyers and sellers. They trade international currencies at an agreed price. We can define the Foreign exchange or “Forex” as a network of buyers and sellers who transfer international currency between each other at an agreed price. Forex is different from shares or commodities. It takes place directly in an OTC market. These markets are including:
- Forward Forex market
- Spot Forex market
- Future Forex market.
Speculators follow predictions and news to take profit from price movements. They don’t plan to take the currency itself. The number you see in the Forex market as price is the base currency value in the quote currency. Dozens of trading bots and expensive software exist for everyday professional trades. You can trade using Forex VPS 24/7 and from anywhere.
People can use Foreign currencies in several ways. You buy a currency, and you can go abroad to that country or buy something from there. In these times you need to exchange some money for practical purposes. Providing currencies can be Forex’s primary purpose, but most exchanges and trades are happening to earn profit in reality. Most of the transactions are taking place by computer and technology. Bots can facilitate and assist in this field, and thus we will also take a look at the world of Bot trade and describe its types and functions.
How do Currency Markets Work?
Forex trading takes place directly between two parties. Unlike shares or commodities, Forex trading does not take place on exchanges but directly between two parties in an OTC market.
There is no time limit, and you can trade Forex 24/7. Speculators follow predictions and news to take profit from price movements. They don’t plan to take the currency itself. The Forex market is run by a global network of banks, spread across four major Forex trading centers in different time zones: London, New York, Sydney, and Tokyo.
Three Different Types of Forex Market
Forex markets have 2 types including:
1. Spot Forex market
Forex is the physical exchange of a currency pair, which occurs at the definite point of trade settlement (“on the spot”) or within a short period.
2. Future Forex Market
In this market, you may sign a contract, and you can buy or sell a specific amount of currency with a special price and date in the future.
What is a Base and Quote Currency?
A Forex pair’s price is how much one unit of the base currency is worth in the quote currency. A base currency is the first currency listed in a Forex pair, while the second currency is called the quote currency. Forex trading always involves selling one currency to buy another, so we show it pairs. There are three-letter codes for each currency, usually made up of two letters that stand for the region and one standing for the money itself. For example, JPY/USD is a currency pair that involves buying the Japanese Yen and selling the US dollar.
Let’s look at an example; JPY is the base currency, and USD is the quote currency. If JPY/USD is trading at 1.12101, then one Yen is worth 1.12101 Dollars.
If you think that the base currency in a pair is likely to strengthen against the quote currency, you will buy the pair. If you believe it will weaken, you can sell it. If the base (Yen in this example) rises against the Dollar, then a single Yen will be worth more Dollars, and the pair’s price will increase. If it drops, the pair’s price will decrease. Forex trading works according to the predictions based on the countries’ economic, political, and industrial analysis.
What Forces Move the Forex Market?
Like most financial markets, Forex is also primarily driven by the forces of supply and demand. It is essential to understand the influences that drive price fluctuations here.
1. Central Banks
central banks of countries control the supply of currency, which can announce measures that will significantly affect their currency’s price. Increasing liquidity; injecting more money into an economy can cause a drop in the currency’s value.
2. News Reports
Commercial banks and other investors tend to want to put their capital into economies with a strong outlook. So, if a cheerful piece of news hits the markets about a particular region, it will encourage investment and increase demand for that region’s currency. The opposite is similarly also true then; a piece of negative news can cause investment to decrease and lower a currency’s price. So currencies tend to reflect the reported economic health of the region they represent.
3. Market Response
the market’s reaction to the news can also play a significant role in driving currency prices. If traders believe that a currency moves in a specific direction, they will trade accordingly and convince others to follow suit, increasing or decreasing demand.
4. Economic Data
Economic data is integral to the price movements of currencies; it indicates how an economy is performing, and it offers insight into what its central bank might do next.
How does Forex Trading Work?
Forex Trading works by simultaneously buying one currency while selling another. Traditionally, many Forex transactions are taking place via a Forex broker. Still, within the rise of online trading, you can obtain information on Forex price movements using CFD trading tools.
We should trade currencies in lots. Forex traders tend to trade small amounts, so the Standard of the lot is 100000 units of based currency. Individual traders may not have 100000 dollars (for example) to set on every trade, so there is another tool to support this idea, “leverage.”
What is Margin in Forex?
Margin is the initial deposit to open and a leveraged position. The size of this deposit margin is different depending on the broker and your trade amount.
Margin is a percentage of the whole position. A trade on EUR/GBP may only require 1% of the total trade value for the deposit.
What is a Pip in Forex?
Pip is a unit for measure minimum movement in the market. It’s equivalent to a one-digit movement in the fourth decimal place. For example, if GBP/USD moves from $1.2568 to $1.2569, it moved one single pip. There are decimal places after pip that are called fractional pip.
One of the leading technologies in the trading market is bot trading. In this new technology, you set the trading bot, and it will make the position along with your setting. They use several indicators and analysis tools to predict the price movement, so it is an excellent way to make effortless trade.
These trading robots are mainly auto trading programs. The language for programming this software is the MQL scripting language. With this software, you can generate trading signals or make orders and manage trades.
Risks of Forex Trading Robots
You can buy this software and bots online. You should be cautious when you want to purchase and use these robots. The expenses of a funded manager and trading bot may have some risks.
In the case of robots, they are new technologies and are in immature illiquid markets. There are risks of software failure and may cause heave losses. You still may be a victim of a flash crash or a scam activity.
Be concise to find a perfect bot. Poor bots have weak coded programs that increase your risk. It is likely to lose your money just by using a poor bot. When you want to trade in bitcoin, you should look for the most reputed trading tool in bitcoin trades that exists.
In the flash crash of June 2017 in Ether, a GDAX trader that hadn’t set stop-loss limits experienced heavy losses. There may occur other flashes in the cryptocurrency market. It’s more often than we can think. This matter poses high risks for traders that trade with trading bots.
The companies often don’t tell you all outputs of their trading bots. They enlarge the successful trade as the most likely outcome of their trading bot. They probably use curve-fitting to show you great results in the time of testing the system. They are not legitimate systems for evaluating risk and opportunity.
Ineffective on the Long Run
One of the other weaknesses of trading botts is that they can’t function appropriately in long-term trades. They only focus on short-term trends, so a sudden price movement can wipe out all you gained in the short-term signals.
Cryptocurrency Trading Bots
We can currently see several cryptocurrency trading bots in the market that we can purchase and use. From free software that anyone can use without any fees or to expensive professional software is in access. These Bots vary in quality, performance, and profitability.
Now that we are more familiar with trading bots and their contribution to Forex Trade. Let’s explore Hosting Services’ contribution to Forex trade.
What are the Advantages of Trading Forex Using a VPS?
Forex trading Using a VPS has lot of advantages that some of them are including:
You can Trade Anywhere.
As for those with a desktop PC and not a laptop, work can sometimes limit you to your computer’s location. There are alternatives, but maybe you don’t feel like purchasing a mobile device or a laptop, or possibly your broker doesn’t support mobile trading. Perhaps you don’t like the interface. In that case, you can connect to your platform from anywhere as long as you have a network connection where you can log onto your VPS to trade, even a hotel or internet café.
Having a Strong Security
The VPS systems offered by current companies have the best kind of security. Provider checks the managed VPS servers for the best functioning. Most of the providers offer 99.9% uptime. They may send you antivirus and other valuable tools for a better quality of security.
Trade During a Power Outage
When you use automated systems for trade, no problem is where you are or your power access. The computerized system makes trades for you even you don’t notice. It’s a way for you to gain profit without power.
Reduced Slippage and Faster Trade Execution
VPS systems offer you more speed in placing the order. Slippage is the delay between the time you place the order and the time market registered it.
If you want more speed and performance, you can use a VPS in the broker’s location. It enables you to trade faster than would otherwise be possible. When you rely on software to change, VPS is beneficial. Try to find a VPS server near the location of your brokers’ server.
What are the Disadvantages of Trading Forex Using a VPS?
The VPS is not invulnerable to every problem. There are three disadvantages of Forex trading VPS that you need to know before you use it:
VPS Is not Free
Personal computers don’t charge you monthly. But using VPS servers charges you a few dollars per month. If you don’t pay the monthly fee, your access will disconnect.
When you use a personal computer, you can manage your devices’ usage. imagine you have a personal computer that you can limit for personal use because you have no
The capacity provided by the VPS provider largely depends on the VPS package you purchase. However, their capacity will not be as high as the capacity of your device. This constraint often makes VPS users feel like borrowing from other people’s computers, which belongs to the VPS Hosting supplier.
Therefore, many traders only rent VPS as long as they need to trade with the Expert Advisor (EA).
You also need to regularly clean your memory to ensure that the VPS runs smoothly and that not many unused files are populating the system. The maintenance includes the factor of the VPS that each trader requires to do individually.
The VPS’s disadvantage is generally related to external problems on the financial side of the server specification. However, if the trader has enough funds and the profit made can cover the monthly subscription, it may be reasonable to rent a VPS for Forex trading.
The Advantages of trading Forex using a VPS are that you can trade anywhere, you will experience strong security, and you can deal during a power outage. Its disadvantages will be that VPS is not free, and you have to share the hardware and capacity.